DETROIT -- Hundreds of North American auto partsmakers may fail within months as a weakening economy forces automakers to slash production, the CEO of Canadas second-largest supplier said.
We will see fewer OEMs and fewer suppliers either as a result of irreparable financial distress or for some as a result of a strategic shift out of the automotive industry, Linamars Linda Hasenfratz told the Automotive News World Congress here last month.
In January, at least three Michigan-based US suppliers sought bankruptcy protection or liquidation.
Checker Motors, the partsmaker that once produced the Checker taxi cab, filed for Chapter 11 bankruptcy on January 16.
That same day, electronics supplier May & Scofield shut down after Bank of America foreclosed on its US assets, the Associated Press reported. In addition, Specialty Motors Holding filed for Chapter 7 liquidation.
The immediate future is a fairly gloomy place, said Hasenfratz, who is also chairman of the Original Equipment Suppliers Association (OESA).
But once the market turns back up, with fewer suppliers and rising production, we all have a future to focus on, she said.
Hasenfratz called on government and union support along with more cost cutting among her supplier peers to rescue the auto industry. She also said suppliers should follow Linamars lead in rapidly and deeply cutting costs, reducing staff and overheads to match new sales levels while focusing on diversifying our businesses to take our skills to markets that need us.
Suppliers are really a step ahead of the process, having already taken the haircut that the government is now looking to other parties to sign up to accept, she said.
She applauded contractual changes from the UAW, but called on labor to come to the table with further concessions to create a competitive cost environment for these companies to operate in.
Calling for support
Government is the next target in her sights. Hasenfratz, and the association that she chairs, are following automakers in seeking government help.
Their first priority is quick pay, she said. She would allow automakers to tap the Troubled Asset Relief Program, or TARP, funds if they would agree to pay suppliers more quickly. This is an easy, simple way to put more cash in suppliers hands today, she said.
Another priority, she said, is government guarantees for suppliers receivables. This would improve access to supplier financing.
The third priority, she said, would aid suppliers by allowing them access to bridge loans or access to credit lines through TARP.
Lastly, she said, OESA is advocating that the government provide debtor-in-possession financing in the event a supplier enters Chapter 11 reorganization.
Hasenfratz cautioned against protectionist policies creeping into government-backed solutions. It is common knowledge that protectionist trade policies were a key factor in the escalation of the Great Depression. Lets not make those same mistakes again, she said.
Linamar, a global supplier of powertrain parts, has 37 plants in Canada, the US, the UK, Mexico, Germany, Sweden, Hungary, China, Korea and Japan.